Are you the kind of person that seems to never have money, and you have no idea why?
You make a decent income, but somehow, by the end of the month, there’s nothing left, and you find yourself charging groceries on your credit card. Well, unfortunately, most of us are not born with amazing financial instincts. That’s why it’s not hard for advertisers to trick us into buying things we don’t need for more money than those things are worth.
But there’s good news as well. You can learn. You can get better at managing your money no matter how bad you think you are at the moment. It will take a bit of time and patience, but you’re not doomed. This isn’t some special talent that you have to be born with. You can start by avoiding these common money mistakes.
You don’t have a budget
There aren’t that many people who get excited at the prospect of budgeting. But it’s one of those things that you have to do, like doing your laundry. It might now be fun, but you need clean clothes. And just like doing laundry, it’s not that difficult. If you don’t even know where your money is going, how are you supposed to take control of your finances?
Maybe you associate budgeting with restrictions, so you’d do anything to avoid it. You want to be free and enjoy life. But if you’re reading this article, you’ve probably already learned that improvising and hoping for the best isn’t exactly the best strategy. In reality, budgeting doesn’t restrict your freedom. It gives you more of it because it helps you develop a better understanding of your finances and what steps you can take to improve them. This gives you more control over your life, and the more control you have over your life, the freer you become.
When you start budgeting, you’ll notice how all these little expenses that you’ve never really considered add up and keep you from accomplishing things that actually matter to you. Maybe you want to go on a vacation to a country you’ve always dreamed of visiting. You keep trying to save money, but it’s not going very well. By budgeting, you’ll discover those subscriptions you forgot to cancel or just didn’t want to bother with, and instead of wasting money on things that spark absolutely no joy, you can put it to better use.
Learning how to budget is an essential step to building the life you want for yourself.
You live paycheck to paycheck
You get your paycheck, pay your bills, and then you simply continue to spend whenever necessary or whenever the opportunity arises. If you have anything left in your account, you just leave it there for next month. If not, that’s what credit cards are for.
You could be making a six-figure income, and you’d still get into debt with these spending habits. As we hope you know, credit cards have high interest rates. If you know this because you already have debt on several, we suggest you calculate your budget to see what kind of payment plan you can afford and start looking into personal loans to consolidate your credit card debt. Since credit cards have such high interest rates and penalties, it’s much easier for your debt to balloon and get out of control. Plus, once you accumulate debt on them, whatever charges you continue to make translate into paying premium prices.
Living paycheck to paycheck essentially means that you’re always at risk of getting into debt. If one month your car breaks down or something else happens that requires spending more money than usual, your only option is to get into debt because you don’t have any savings. Maybe you’re lucky, and you can borrow from friends or relatives, but it’s much better to have a safety net. It’s generally recommended that you save 10 to 20% of your income and build up an emergency fund that you can live off for at least three to six months.
You pay full price for major purchases
We’ve gotten so used to buying on impulse that we do it even when it comes to major purchases. We don’t save the money for a few months to get a new laptop or phone. Instead, we buy it immediately and pay installments for the next few months. If there’s any bit of time we’re willing to wait between “I want that” and buying it, it’s usually spent reading reviews on the product in question.
But unless your laptop or phone is broken, then you can probably wait a few months, and you can spend this time reading reviews and comparing products, but also looking for special offers. Most of the joy of buying something new is felt in the period before we buy it. Afterwards, we quickly grow bored and start wanting something else.
So turn it into a fun ritual. Every time you want to get something new, start looking at reviews, set a time frame and how much you have to save. When you’re close to the purchase date you’ve decided for yourself, you can scour the internet for special offers, discounts, coupons and clearances. They’re usually only a few clicks away.
You don’t have any clear financial goals
If you’re not particularly fond of budgeting and saving, you’re not going to keep yourself motivated through vague goals like save money or learn good financial habits. You need something clear and concrete. Start small. Save money for something you want that will only take a few months. Let’s say a new gadget or a short vacation.
This will motivate you to keep track of your spending and cut back. You’re more likely to resist spending too much money when going out with friends or buying something new to wear if you know that it’s for something you really want that’s only a few short months away. But during this time you’ll pick up some new skills and get used to this lifestyle.
As it gets easier and you find your balance, you can move on to slightly bigger goals like the down payment on a car. Then you keep increasing your goals until you have your emergency fund, savings for retirement and enough for big purchases like a house. It won’t take you long to see the advantages of these changes. This way, when you need to replace an appliance or fix your car, or even buy yourself something that really matters to you, you won’t have to charge on your credit card and hope you’ll be able to make the payments. You can simply buy it because you have savings, and you also have the skills to make the necessary adjustments to your budget.